Blockchain technology has been around now for over a decade. It has been widely adopted and the technology has grown and evolved into different layers, each with its unique characteristics and purposes. The layers are referred to as Layer 0, Layer 1, Layer 2, and Layer 3.
What are Blockchain Layers?
Blockchain layers refer to the different components of a blockchain system that work together to ensure the security and scalability of the technology. Blockchains are decentralized and lack a central authority, so they use a distributed ledger system to authenticate transactions through a consensus reached by numerous nodes in the network. The layered architecture of blockchains clusters different functions together to provide security and scalability.
As the number of users on the blockchain grows, the layers ensure that the system can handle the increased demand while maintaining top-notch security. By understanding the different layers of a blockchain, we can gain a deeper appreciation for the technology and its potential applications.
Blockchains have many practical uses, which include:
- Cryptocurrencies
- DeFi applications
- Non-fungible tokens (NFTs)
- Smart contracts
Layer 0
Layer 0 refers to the underlying technology that enables the blockchain network to operate, such as the internet, hardware, and connections. It is the backbone of blockchain and is essential to its creation and core function.
When used to describe blockchains, Layer 0 generally refers to “networks of blockchains”. This includes protocols facilitating cross-chain operability, such as Polkadot or Avalanche.
Layer 0 blockchain examples
Examples of Layer 0 blockchains include:
Layer 1
Layer 1 is the fundamental layer of the blockchain network responsible for the consensus process, programming languages, block duration, dispute resolution, and guidelines that ensure the network’s basic functionality. Layer 1 is crucial to the security of the blockchain network, and its immutability ensures that the network is tamper-proof.
Bitcoin and Ethereum are known as Layer 1 blockchains – these are independent decentralized networks that operate & execute transactions without any assistance from the outside. Layer 1 blockchains serve as a base layer for Layer 2 and Layer 3 solutions to be built on top of.
Layer 1 blockchain examples
Many popular blockchains are considered Layer 1, for example:
Layer 2
Layer 2 is an overlapping network positioned above the base layer. It includes third-party integrations that work with layer 1 to increase the number of nodes and the system throughput.
L2 solutions include state channels, sidechains, and rollups.
State channels enable two-way communication between a blockchain and off-chain transactional channels, increasing overall transaction volume and speed.
Sidechains are separate transactional chains that work with the blockchain and are used for many transactions.
Rollups are scaling options that enable transactions outside the layer 1 network, with resulting data uploaded to the layer 2 blockchain.
Layer 1 blockchain examples
Layer 2 blockchains help to overcome limitations of the underlying blockchains. Examples of these include:
- Optimism (Ethereum-based)
- Arbitrum (Ethereum-based)
- Polygon (Ethereum-based)
- Lightning Network (Bitcoin-based)
Layer 3
Layer 3, commonly referred to as L3, is the application layer. It serves as the user interface, hiding the technical details of the communication channel. L3 apps give blockchain practical utility, enabling users to interact with the blockchain network through application programming interfaces, frameworks, scripts, and user interfaces.
Layer 3 protocols are unique solutions built on top of layer 2 networks, helping address interoperability issues present in most blockchains.
Layer 3 blockchain examples
Some notable examples of L3 blockchains include
- Interledger Protocol (used by Ripple)
- ICON
- Quant
- IBC Protocol (used by Cosmos)
the blockchain infrastructure consists of 5 layers:
- The hardware infrastructure layer is the foundation of blockchain technology, comprising the physical devices that power the network.
- The data layer is responsible for storing and retrieving information.
- The network layer facilitates communication between nodes on the blockchain.
- The consensus layer ensures that all nodes on the network agree on the current state of the blockchain.
- The application layer provides an interface for users to interact with the blockchain.
In addition, another classification is used by the crypto community to describe the same architectural layers, and it goes as follows:
- Layer 0 – includes hardware and data layer
- Layer 1 – contains network consensus layer
- Layer 2 – Represents networks built on top of existing blockchains helping to solve their underlying issues
- Layer 3 – Is the application layer, hosting applications for users to interact with.
And finally, Layer 0 – 3 refer to blockchains based on their characteristics. For example:
L3: Icon, Quant, IBC Protocol – Application layer solutions built on top of Layer 2 networks & offering specific solutions to some problems.
L0: Polkadot, Avalanche, Cardano – cross-chain operability protocols
L1: Bitcoin, Ethereum, Solana – base layer blockchain networks
L2: Optimism, Polygon, Arbitrub – scaling solutions built on top of underlying networks
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